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Monday, 11 October 2021

World Bank upgrades Egypt’s post-covid GDP growth outlook

Egypt’s economy is expected to grow 5.0% in FY2021-2022, up from the 3.3% in FY2020-2021, according to the World Bank’s October 2021 MENA economic update (pdf). The World Bank’s forecast marks an upward revision from its April economic update, when it said Egypt’s GDP would grow at a 4.5% clip during the current fiscal year.

Egypt’s economic recovery is seen “dominating” oil importing countries’ performance this calendar year, with overall real GDP growth among oil importing countries expected to come in at 4.3% by the end of 2021.

Public sector expected to account for greater share of growth: Despite being on track to record stronger GDP growth levels than it did pre-Covid, Egypt “remains constrained by anemic private sector dynamism,” the report says, pointing to a 14% y-o-y increase in public investments in 1Q2021 compared to a 43% drop in nominal private investments during the same three months.

The wider MENA region is in for a “tenuous and uneven recovery” this calendar year, with GDP now expected to grow 2.8% y-o-y in 2021, after contracting 3.8% in 2020, according to the report. The pandemic has caused the region to sustain some USD 200 bn in GDP losses, compared to “where the region’s GDP would have been if the pandemic had not hit.”

The region’s GDP per capita is expected to inch up by a mere 1.1% — a rebound from the 5.4% contraction registered in 2020 and an upward revision from the 0.6% the World Bank had penciled in back in April. The World Bank’s forecast indicates GDP per capita growth will still be 4.3% lower than it was in 2019.

One of the main culprits of this sluggish recovery in the region: Stressed public healthcare systems that were caught off guard by and unable to cope with a pandemic. Many governments in the region had also overestimated their health systems’ preparedness to cope with health emergencies, which the report suggests is partially due to “the region’s young population [creating] the statistical illusion of a healthy population.” As of 2019, Egypt’s government expenditure on healthcare as a percentage of GDP was among the lowest in the region, with only 1.42% of overall government spending earmarked for the sector.

But the key to stronger healthcare systems isn’t necessarily increased spending — it’s an increase in efficient spending. A lack of efficient spending generally leads to an increase in out-of-pocket spending on health services, which drains household incomes and “shifts purchasing power away from large population pools that demand upstream health measures, like prevention and disease surveillance, to those in need of downstream, often costlier, individual services.”

The WB is not happy with our expenditure on preventative care: Despite the rollout of Egypt’s universal healthcare system — which was first introduced on a pilot basis in Port Said in 2019 — Egypt, Tunisia, and Jordan exhibit lower rates of government expenditure on preventive health care compared to their income peers, the World Bank says. In Egypt’s 2021-2022 sustainable development plan released earlier this year, the government said it plans to aggressively ramp up its investments in healthcare infrastructure to EGP 4.7 bn, up 205% y-o-y.

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